**FORM 10-Q**

 

**United States**

**Securities and ExchangeCommission**

**Washington, D. C. 20549**

 

**(MarkOne)**
| **ý**                                  | ** ** | **Quarterly  Report Pursuant to Section 13 or 15(d)**                                  |
|---------------------------------------------|------------|---------------------------------------------------------------------------------------------|
| ** **                                  | ** ** | **       of the  Securities Exchange Act of 1934**       |
|                                        |       |                                                                                        |
| **For Quarter Ended: August 31, 2005** |
|                                        |       |                                                                                        |
| **OR**                                      |
|                                        |       |                                                                                        |
| **o**                                       | ** ** | **Transition  Report Pursuant to Section 13 or 15(d)**                                 |
|                                        |       | **        of  the Securities Exchange Act of 1934** |

 

**Commission File Number: 0-14820**

 

**IMMUCOR, INC.**

(Exact name of registrant as specified in its charter)

 
| **Georgia**                                                  | ** ** | **22-2408354**      |
|--------------------------------------------------------------|------------|---------------------|
| (State or other jurisdiction of                              |       | (I.R.S. Employer    |
| incorporation or organization)                               |       | Identification No.) |
|                                                         |       |                |
| **3130 Gateway Drive P.O. Box 5625 Norcross,  Georgia** | ** ** | **30091-5625**      |
| (Address of principal executive offices)                     |       | (Zip Code)          |

 

Registrant’s telephone number:  **(770) 441-2051**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes  ý     No  o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).

 

Yes  ý     No  o

 

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).

 

Yes  o     No  ý

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

As of October 31, 2005: Common Stock, $0.10 Par Value – 45,582,108

 

 

----

 

IMMUCOR, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED AUGUST 31, 2005

 

INDEX

 
| PART I –  FINANCIAL INFORMATION |
|-------------------------------------------|
|                                      |   |
| Item 1.                                   | Consolidated Balance Sheets |
|                                      |   |
|                                      | Consolidated Statements of  Income |
|                                      |   |
|                                      | Consolidated Statements of Cash  Flows |
|                                      |   |
|                                      | Notes to Consolidated  Financial Statements |
|                                      |   |
| Item 2.                                   | Management’s Discussion and  Analysis of Financial Condition and Results of Operations |
|                                      |   |
| Item 3.                                   | Quantitative and Qualitative  Disclosures About Market Risk |
|                                      |   |
| Item 4.                                   | Controls and Procedures |
|                                      |   |
| PART II – OTHER INFORMATION     |
|                                      |   |
| Item 1.                                   | Legal Proceedings |
|                                      |   |
| Item 2.                                   | Unregistered Sales  of Equity Securities and Use of Proceeds |
|                                      |   |
| Item 6.                                   | Exhibits and Reports on  Form 8-K |

 

2

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**IMMUCOR, INC.**

## **CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                                                    | ** ** | **August 31, 2005** | ** **  | **May 31, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|-------------|-----------------------|------------|
| ** **                                                                                                                                    | ** ** | **(Unaudited)**          | ** **  | ** **            | ** ** |
| **ASSETS**                                                                                                                                    |       |                     |        |                  |       |
|                                                                                                                                          |       |                     |        |                  |       |
| CURRENT ASSETS:                                                                                                                               |       |                     |        |                  |       |
| Cash and cash  equivalents                                                                                                                    |       | $                        | 46,803,350  |                  | $          | 37,107,539 |   |
| Short-term  investments                                                                                                                       |       | 2,969,964                |        | 1,972,649             |       |
| Accounts  receivable, trade (less allowance for doubtful accounts of $1,941,701 at  August 31, 2005 and $1,873,657 at May 31, 2005) |       | 34,948,522               |        | 34,629,624            |       |
| Other  receivables                                                                                                                            |       | 1,218,901                |        | 1,112,671             |       |
| Inventories                                                                                                                                   |       | 21,109,425               |        | 21,836,412            |       |
| Income taxes  receivable                                                                                                                      |       | 43,212                   |        | 222,133               |       |
| Deferred income  taxes                                                                                                                        |       | 1,568,101                |        | 1,568,137             |       |
| Prepaid expenses  and other                                                                                                                   |       | 2,121,513                |        | 2,433,309             |       |
|                                                                                                                                          |       |                     |        |                  |       |
| Total current  assets                                                                                                                         |       | 110,782,988              |        | 100,882,474           |       |
|                                                                                                                                          |       |                     |        |                  |       |
| PROPERTY, PLANT  AND EQUIPMENT - Net                                                                                                          |       | 24,007,055               |        | 23,034,727            |       |
|                                                                                                                                          |       |                     |        |                  |       |
| DEFERRED INCOME  TAXES                                                                                                                        |       | 2,021,698                |        | 1,845,203             |       |
|                                                                                                                                          |       |                     |        |                  |       |
| OTHER ASSETS-  Net                                                                                                                            |       | 526,939                  |        | 1,112,997             |       |
|                                                                                                                                          |       |                     |        |                  |       |
| DEFERRED  LICENSING COSTS - Net                                                                                                               |       | 745,630                  |        | 772,240               |       |
|                                                                                                                                          |       |                     |        |                  |       |
| CUSTOMER LIST –  Net                                                                                                                     |       | 1,118,750                |        | 1,140,000             |       |
|                                                                                                                                          |       |                     |        |                  |       |
| EXCESS OF COST  OVER NET TANGIBLE ASSETS ACQUIRED - Net                                                                                       |       | 39,655,607               |        | 28,825,592            |       |
|                                                                                                                                          |       |                     |        |                  |       |
|                                                                                                                                          |       | $                        | 178,858,667 |                  | $          | 157,613,233 |   |

 

See notes to consolidatedfinancial statements.

 

3

----

 
| ** **                                                                                                                                                                        | ** ** | **August 31, 2005** | ** **  | **May 31, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|-------------|-----------------------|------------|
| ** **                                                                                                                                                                        | ** ** | **(Unaudited)**          | ** **  | ** **            | ** ** |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                     |       |                     |        |                  |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| CURRENT  LIABILITIES:                                                                                                                                                             |       |                     |        |                  |       |
| Current portion  of borrowings under bank line of credit agreements                                                                                                               |       | $                        | 147,965     |                  | $          | 148,188 |   |
| Current portion  of long-term debt                                                                                                                                                |       | 4,042,905                |        | 4,042,295             |       |
| Current portion  of capital lease obligations                                                                                                                                     |       | 358,413                  |        | 426,926               |       |
| Accounts payable                                                                                                                                                                  |       | 8,693,148                |        | 8,027,562             |       |
| Current portion  of guarantee liability                                                                                                                                           |       | 1,090,146                |        | —                |       |
| Income taxes  payable                                                                                                                                                             |       | 5,548,802                |        | 3,448,502             |       |
| Accrued salaries  and wages                                                                                                                                                       |       | 4,547,395                |        | 3,343,894             |       |
| Deferred income  taxes                                                                                                                                                            |       | 837,741                  |        | 661,040               |       |
| Deferred  revenues                                                                                                                                                                |       | 4,806,305                |        | 4,044,069             |       |
| Other accrued  liabilities                                                                                                                                                        |       | 5,670,031                |        | 5,794,071             |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| Total current  liabilities                                                                                                                                                        |       | 35,742,851               |        | 29,936,547            |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| LONG-TERM DEBT –  Net of current portion                                                                                                                                     |       | 1,069,609                |        | 2,080,713             |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| CAPITAL LEASE  OBLIGATIONS – Net of current portion                                                                                                                          |       | 823,091                  |        | 910,405               |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| ACQUISITION  LIABILITY                                                                                                                                                            |       | 3,604,943                |        | —                |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| GUARANTEE  LIABILITY- Net of current portion                                                                                                                                      |       | 1,260,678                |        | —                |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| DEFERRED INCOME  TAXES                                                                                                                                                            |       | 2,294,860                |        | 2,285,344             |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| DEFERRED  REVENUES                                                                                                                                                                |       | 6,478,104                |        | 3,514,633             |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| OTHER  LIABILITIES                                                                                                                                                                |       | 1,476,508                |        | 1,453,240             |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                       |       |                     |        |                  |       |
| Common stock - authorized 60,000,000 shares, $0.10 par value;  45,545,920 and 45,525,592 issued  and outstanding at August 31, 2005 and May 31, 2005, respectively |       | 4,554,592                |        | 4,552,560             |       |
| Additional  paid-in capital                                                                                                                                                       |       | 32,944,304               |        | 32,691,614            |       |
| Retained  earnings                                                                                                                                                                |       | 87,862,630               |        | 79,856,954            |       |
| Accumulated  other comprehensive income                                                                                                                                           |       | 746,497                  |        | 331,223               |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
| Total  shareholders’ equity                                                                                                                                                  |       | 126,108,023              |        | 117,432,351           |       |
|                                                                                                                                                                              |       |                     |        |                  |       |
|                                                                                                                                                                              |       | $                        | 178,858,667 |                  | $          | 157,613,233 |   |

 

See notes to consolidatedfinancial statements.

 

4

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**IMMUCOR, INC.**

## **CONSOLIDATED STATEMENTS OF INCOME**

(Unaudited)

 
| ** **                                 | ** ** | **For the Three Months Ended** | ** ** |
|--------------------------------------------|------------|--------------------------------|------------|
| ** **                                 | ** ** | **August 31,**            | ** ** | **August 31,** | ** ** |
| ** **                                 | ** ** | **2005**                       | ** ** | **2004** | ** ** |
|                                       |       |                           |       |   |   |
| NET SALES                                  |       | $                              | 42,434,493 |   | $ | 32,102,211 |   |
|                                       |       |                           |       |   |   |
| COST OF SALES                              |       | 15,739,190                     |       | 13,789,739 |   |
|                                       |       |                           |       |   |   |
| GROSS MARGIN                               |       | 26,695,303                     |       | 18,312,472 |   |
|                                       |       |                           |       |   |   |
| OPERATING EXPENSES:                        |       |                           |       |   |   |
| Research and  development                  |       | 1,255,431                      |       | 1,088,806 |   |
| Selling and  marketing                     |       | 5,214,661                      |       | 4,066,386 |   |
| Distribution                               |       | 1,851,320                      |       | 1,939,017 |   |
| General and  administrative                |       | 5,822,256                      |       | 3,016,932 |   |
| Amortization                               |       | 70,497                         |       | 96,063 |   |
|                                       |       |                           |       |   |   |
| Total operating  expenses                  |       | 14,214,165                     |       | 10,207,204 |   |
|                                       |       |                           |       |   |   |
| INCOME FROM OPERATIONS                     |       | 12,481,138                     |       | 8,105,268 |   |
|                                       |       |                           |       |   |   |
| OTHER INCOME (EXPENSE):                    |       |                           |       |   |   |
| Interest income                            |       | 182,975                        |       | 136,627 |   |
| Interest expense                           |       | (158,983                       | )          | (106,332 | ) |
| Other income  (expense) - net              |       | 82,428                         |       | (295,204 | ) |
|                                       |       |                           |       |   |   |
| Total other  income (expense)              |       | 106,420                        |       | (264,909 | ) |
|                                       |       |                           |       |   |   |
| INCOME BEFORE INCOME TAXES                 |       | 12,587,558                     |       | 7,840,359 |   |
| INCOME TAX EXPENSE                         |       | 4,581,882                      |       | 2,891,406 |   |
| NET INCOME                                 |       | $                              | 8,005,676  |   | $ | 4,948,953 |   |
|                                       |       |                           |       |   |   |
| Earnings per share:                        |       |                           |       |   |   |
| Per common share                           |       | $                              | 0.18       |   | $ | 0.11 |   |
| Per common share  – assuming dilution |       | $                              | 0.17       |   | $ | 0.10 |   |
|                                       |       |                           |       |   |   |
| Weighted average shares outstanding:       |       |                           |       |   |   |
| Basic                                      |       | 45,541,734                     |       | 45,105,638 |   |
| Diluted                                    |       | 47,737,982                     |       | 47,558,852 |   |

 

See notes to consolidatedfinancial statements.

 

5

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**IMMUCOR, INC.**

## **CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited)

 
| ** **                                                                                | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                | ** ** | **August 31,**            | ** ** | **August 31,** | ** ** |
| ** **                                                                                | ** ** | **2005**                       | ** ** | **2004** | ** ** |
| OPERATING ACTIVITIES:                                                                     |       |                           |       |   |   |
| Net income                                                                                |       | $                              | 8,005,676  |   | $ | 4,948,953 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities:        |       |                           |       |   |   |
| Depreciation and  amortization of property and equipment                                  |       | 1,714,665                      |       | 1,571,063 |   |
| Amortization of  other assets                                                             |       | 70,497                         |       | 96,063 |   |
| Amortization of  debt issue costs                                                         |       | 12,967                         |       | 11,025 |   |
| Accretion of  acquisition and guarantee liabilities                                       |       | 31,530                         |       | — |   |
| Loss on  retirement of fixed assets                                                       |       | 10,925                         |       | 170,477 |   |
| Deferred tax  provision                                                                   |       | 11,074                         |       | 5,080 |   |
| Provision for  doubtful accounts                                                          |       | 185,793                        |       | 92,972 |   |
| Other                                                                                     |       | 34,572                         |       | — |   |
| Changes in  operating assets and liabilities, net of effects of acquisition:              |       |                           |       |   |   |
| Accounts  receivable, trade                                                               |       | (446,038                       | )          | (1,338,076 | ) |
| Income taxes                                                                              |       | 2,472,413                      |       | 2,914,423 |   |
| Inventories                                                                               |       | 789,814                        |       | (700,648 | ) |
| Other  receivables                                                                        |       | (106,444                       | )          | 83,738 |   |
| Other current  assets                                                                     |       | 315,476                        |       | (601,124 | ) |
| Other long-term  assets                                                                   |       | 566,058                        |       | 139,699 |   |
| Accounts payable                                                                          |       | 673,226                        |       | 410,079 |   |
| Deferred revenue                                                                          |       | 3,905,993                      |       | 244,405 |   |
| Other current  liabilities                                                                |       | 1,089,316                      |       | 623,298 |   |
| Other long-term  liabilities                                                              |       | 16,967                         |       | (19,519 | ) |
| Total  adjustments                                                                        |       | 11,348,804                     |       | 3,702,955 |   |
|                                                                                      |       |                           |       |   |   |
| Cash provided by operating activities                                                     |       | 19,354,480                     |       | 8,651,908 |   |
|                                                                                      |       |                           |       |   |   |
| INVESTING ACTIVITIES:                                                                     |       |                           |       |   |   |
| Purchases of /  deposits on property and equipment                                        |       | (2,604,290                     | )          | (1,221,142 | ) |
| Cash paid for  acquisition of majority ownership in Japanese subsidiary                   |       | (4,705,675                     | )          | — |   |
| Payments of  guarantee liability                                                          |       | (201,909                       | )          | — |   |
| Investments in  held to maturity marketable securities                                    |       | (997,315                       | )          | — |   |
| Cash used in investing activities                                                         |       | (8,509,189                     | )          | (1,221,142 | ) |
|                                                                                      |       |                           |       |   |   |
| FINANCING ACTIVITIES:                                                                     |       |                           |       |   |   |
| Repayments of  long-term debt and capital leases                                          |       | (1,162,183                     | )          | (2,194,570 | ) |
| Proceeds from  exercise of stock options (20,328 shares and 120,645 shares, respectively) |       | 12,267                         |       | 203,357 |   |
| Borrowings, net  of repayments under line of credit agreements                            |       | —                         |       | (1,848 | ) |
| Repurchase of  stock                                                                      |       | —                         |       | (8,027,566 | ) |
| Payment of cash  for fractional shares resulting from stock split                         |       | —                         |       | (7,085 | ) |
| Cash used in financing activities                                                         |       | (1,149,916                     | )          | (10,027,712 | ) |
|                                                                                      |       |                           |       |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                   |       | 436                            |       | 48,492 |   |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          |       | 9,695,811                      |       | (2,548,454 | ) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                          |       | 37,107,539                     |       | 15,697,082 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                |       | $                              | 46,803,350 |   | $ | 13,148,628 |   |
|                                                                                      |       |                           |       |   |   |
| SIGNIFICANT NON-CASH INVESTING AND FINANCING  ACTIVITIES:                                 |       |                           |       |   |   |
| Acquisition  obligation                                                                   |       | $                              | 3,546,306  |   | $ |  — |   |

 

See notes to consolidatedfinancial statements.

 

6

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IMMUCOR, INC.

## **Notesto Consolidated Financial Statements**

(Unaudited)

 

1.               BASISOF PRESENTATION

 

Theprincipal business activities of Immucor, Inc. (the “Company”) are thedevelopment, manufacture and marketing of immunological diagnostic medicalproducts. The Company operates facilities in North America, Europe and Japan.The unaudited consolidated financial statements include the accounts of theCompany and its wholly-owned subsidiaries as well as those accounts of itsmajority-owned subsidiary in Japan (see Note 3 to the consolidated financialstatements). All significant inter-company balances and transactions have beeneliminated in consolidation.

 

Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with U.S. generally accepted accounting principles for interimfinancial information and the instructions to Form 10-Q and Article 10of Regulation S-X. Accordingly, they do not include all of the information andfootnotes required by U.S. generally accepted accounting principles forcomplete financial statements. However, there has been no material change inthe information disclosed in the Company’s annual financial statements dated May 31,2005, except as disclosed herein. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the three-month periodended August 31, 2005 are not necessarily indicative of the results thatmay be expected for the year ending May 31, 2006. For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company’s Annual Report on Form 10-K for the year ended May 31,2005.

 

Shareand per share amounts disclosed in this document pertaining to the three-monthperiod ended August 31, 2004 have been retroactively adjusted to reflectthe impact of the December 2004 stock split discussed in Note 5 below.

 

2.               STOCK-BASEDCOMPENSATION

 

TheCompany currently accounts for stock option grants in accordance with AccountingPrinciples Board (“APB”) Opinion No. 25, *Accountingfor Stock Issued to Employees. *Accordingly,the Company recognizes compensation expense only if the stock price on thegrant measurement date exceeds the exercise price (i.e. the grant has intrinsicvalue).  In such a case, the intrinsicvalue of the grant is recognized as compensation expense over the four-yearvesting period of the grant.  Prior tofiscal 2005, the Company granted stock options for a fixed number of shares toemployees with an exercise price equal to the fair value of the shares at the measurementdate of the grant – therefore, these grants had no intrinsic value and,accordingly, no compensation expense was recorded regarding these grants.  Beginning in fiscal 2005, the Company beganawarding grants to eligible new hires with the respective exercise price equalto the closing price on the business day immediately prior to the grant measurementdate — therefore in these cases, the exercise price may be higher or lower thanthe fair value of the shares at the grant measurement date.  However, due to the small number of sharesgranted to new hires and the insignificant differences between the prices onthe grant measurement days and the exercise prices of these new hire grants,the Company has determined that the aggregate intrinsic value of all suchgrants to date is not material to any fiscal period reported and has thereforenot recognized compensation expense regarding these new hire grants.

 

TheCompany also grants stock options to certain employees as a result of theirrespective promotions.  As such grantshave an exercise price equal to the fair value of the shares at the measurementdate of grant, no compensation expense is recognized on these grants as suchexpense is not required to be recognized under APB Opinion No. 25.

 

Fromtime to time, the Company awards grants of stock options to certain groups ofemployees.  In regards to a group grant,the Company has recorded compensation expense totaling approximately $35,000,net of taxes of $19,000, in the quarter ended August 31, 2005, as the fairvalue of the shares on the grant measurement date exceeded the exerciseprice.   Compensation expense for thisgroup grant is being recorded over the four-year vesting period which will endin fiscal 2009.

 

7

----

 

In December 2002,the Financial Accounting Standards Board (“the FASB”) issued Statement ofFinancial Accounting Standards (“SFAS”) No. 148, *Accountingfor Stock-Based Compensation – Transition and Disclosure – an amendment of FASBStatement No. 123. *SFAS No. 148provides alternative methods of transition for a voluntary change to the fairvalue based method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends thedisclosure requirements of SFAS No. 123 to require prominent disclosuresin both annual and interim financial statements about the method of accountingfor stock-based employee compensation and the effect of the method used onreported results.  The following tableillustrates the effect on net income and earnings per share as if the Companyhad applied the fair value recognition provisions of SFAS No. 123 tostock-based employee compensation.

 

| ** **                                                                                                                      | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                      | ** ** | **August 31,**            | ** ** | **August 31,** | ** ** |
| ** **                                                                                                                      | ** ** | **2005**                       | ** ** | **2004** | ** ** |
| Net income as  reported                                                                                                         |       | $                              | 8,005,676  |   | $ | 4,948,953 |   |
| Add: stock-based  employee compensation included in reported net income, net of taxes                                           |       | 35,239                         |       | — |   |
| Deduct total  stock-based employee compensation expense determined under fair value based  methods for all awards, net of taxes |       | (416,072                       | )          | (468,229 | ) |
| Pro forma net  income                                                                                                           |       | $                              | 7,624,843  |   | $ | 4,480,724 |   |
|                                                                                                                            |       |                           |       |   |   |
| Earnings per  share as reported:                                                                                                |       |                           |       |   |   |
| Per common share                                                                                                                |       | $                              | 0.18       |   | $ | 0.11 |   |
| Per common share–assuming  dilution                                                                                        |       | $                              | 0.17       |   | $ | 0.10 |   |
|                                                                                                                            |       |                           |       |   |   |
| Pro forma  earnings per share:                                                                                                  |       |                           |       |   |   |
| Per common share                                                                                                                |       | $                              | 0.17       |   | $ | 0.10 |   |
| Per common  share–assuming dilution                                                                                        |       | $                              | 0.16       |   | $ | 0.09 |   |
|                                                                                                                            |       |                           |       |   |   |
| Pro forma  weighted average shares outstanding:                                                                                 |       |                           |       |   |   |
| Basic                                                                                                                           |       | 45,541,734                     |       | 45,105,638 |   |
| Diluted                                                                                                                         |       | 47,559,374                     |       | 47,558,852 |   |

 

8

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3.               ACQUISITION

 

On July 5, 2005, theCompany acquired a 51% interest in Immucor-Kainos, Inc. — a newly-formedjoint venture with Kainos Laboratories, Inc. (“Kainos”), the Company’sformer distributor of Immucor products in Japan.  This new entity was created via Kainos’spinoff of its blood-banking division and is now Immucor’s distributor inJapan.  For its initial 51% interest,Immucor paid Kainos in cash 459.0 million Japanese Yen which equated to approximately$4.2 million.  The Company paid anadditional $0.5 million in costs associated with this acquisition. The jointventure has 800 shares of common stock authorized, of which 200 shares wereissued upon establishment and are valued at 10.0 million Japanese Yen (the parvalue of these 200 shares of common stock), of which Immucor holds 102 of theseshares.

 

The Company is currentlyevaluating whether this joint venture will meet the definition of a variableinterest entity as defined in the Financial Accounting Standards BoardInterpretation No. 46, *Consolidation of VariableInterest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51*(“FIN No. 46”).  However, the Companyhas determined that, regardless of whether the joint venture is deemed to be avariable interest entity, Immucor is the primary beneficiary; therefore, thetransaction was accounted for as a purchase of a majority-owned business, theresults of operations of which have been included in the Company’s consolidatedfinancial statements beginning July 5, 2005.  Pro forma results of operations for thethree-month period ended August 31, 2004 would not have been materiallydifferent as a result of this acquisition and therefore are not presented. TheCompany’s maximum exposure to loss regarding this joint venture isapproximately $13.0 million at August 31, 2005.

 

In accordance with the terms of the Stock Purchase Agreement associated with the above acquisition, Immucor will purchase the remaining 49% interest from Kainos for 441.0 million Japanese Yen. The Company expects to purchase this remaining interest after a three-year transition period ending on June 30, 2008, but upon mutual agreement with Kainos, may purchase the interest prior to the end of the transition period.  The Company has determined that the Stock Purchase Agreement is a mandatorily redeemable financial instrument as defined in SFAS No. 150, *Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity*, and has accordingly recorded the present value of the obligation to purchase the remaining 49% interest as a long-term liability at August 31, 2005.  The balance sheet caption entitled “Acquisition liability” consists of this long-term obligation which totals $3.6 million at August 31, 2005.  Accretion of the liability is being recorded over the three-year transition period.  Interest expense disclosed on the consolidated statement of income for the three-month period ended August 31, 2005 includes approximately $23,000 from the accretion of this liability.  Given that the Company is required to acquire the remaining 49% interest, minority interest accounting is not applicable.

 

Thefollowing table summarizes the fair values of the assets acquired andliabilities assumed at the date of acquisition of Immucor-Kainos, Inc.:

 

| Total purchase  price                           |   | $          | 7,440,105 |   |
|-------------------------------------------------|--------|------------|-----------|--------|
|                                            |   |       |      |   |
| Net tangible  assets acquired, excluding cash   |   | $          | 46,481    |   |
| Net liabilities assumed                         |   | (2,526,976 | )         |
| Intangible assets acquired, including goodwill  |   | 9,920,600  |      |
|                                            |   |       |      |
| Cash paid for acquisition, net of cash acquired |   | $          | 7,440,105 |   |

 

Theabove purchase price allocation is preliminary as the Company is awaiting fairvalue valuations to be completed by third-parties regarding the customer listacquired from Kainos and the three-way distribution agreement (see discussionbelow).   The total purchase price wasnegotiated on the Company’s behalf by an independent investment banking firmand includes a premium based on management’s belief that this business willachieve higher future profitability levels with the installation of Immucorpersonnel in key managerial positions overseeing the operations of thisbusiness.  The primary purpose of thisacquisition is to allow Immucor to directly market and sell its products inJapan and to expand its presence in Japan.

 

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A distribution agreement was signed on July 5, 2005 between Immucor, Kainos and the joint venture. The new agreement stipulates that Kainos will act as an intermediary between Immucor and the joint venture in that Kainos will have exclusive rights to supply the joint venture with Immucor product during the term of the agreement.  In accordance with this agreement, the joint venture guarantees that Kainos will receive a minimum net profit (as defined in the agreement) of 300 million Japanese Yen by the end of the three-year transition period ending June 30, 2008 on sales of Immucor product to the joint venture, with 125 million Japanese Yen to be received in each of the first two years and the remaining 50 million Japanese Yen in the third year.  The agreement expires on May 30, 2009, but may be terminated sooner (1) upon mutual agreement of the parties, (2) at the end of the transition period, or (3) upon Kainos’ attainment of the minimum guaranteed net profit.  The present value of this 300 million Japanese Yen guarantee was recorded, of which the short-term and long-term portions are included on the balance sheet captions entitled as such and total approximately $2.4 million at August 31, 2005.  Accretion of the liability is being recorded over the three-year transition period.  Interest expense disclosed on the consolidated statement of income for the three-month period ended August 31, 2005 includes approximately $32,000 from the accretion of this liability.  As of August 31, 2005, approximately 22 million Japanese Yen (or approximately $202,000) of the guarantee had been received by Kainos, which reduced the liability accordingly.

 

In accordance with the terms of the Joint Venture Agreement, Immucor has agreed to fund the joint venture’s purchase of Kainos’ blood-banking inventory, the majority of which consists of Immucor products sold to Kainos in the ordinary course of business.  Funding of this inventory purchase is expected to occur by December 31, 2005, and will total approximately $1.8 million which will be accounted for as additional purchase price.

 

In accordance with the terms of a Services Agreement, Kainos has agreed to supply certain services to the joint venture during the three-year transition period.

 

At August 31,2005, approximately $1.1 million of the accounts receivable balance presentedon the Company’s consolidated balance sheet represents amounts receivable fromKainos.  Approximately $453,000 of the accountspayable balance presented on the Company’s consolidated balance sheet as of August 31,2005 represents amounts payable to Kainos.

 

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4.               INVENTORIES

 

Inventoriesare stated at the lower of first-in, first-out cost or market:

 
| ** **                                               | ** ** | **August 31, 2005** | ** ** | **May 31, 2005** | ** ** |
|----------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|
| Raw materials                                            |       | $                        | 5,260,738  |                  | $          | 5,710,331 |   |
| Work in process                                          |       | 2,751,060                |       | 2,946,336             |       |
| Finished goods, goods purchased for resale and  supplies |       | 13,097,627               |       | 13,179,745            |       |
|                                                     |       |                     |       |                  |       |
|                                                     |       | $                        | 21,109,425 |                  | $          | 21,836,412 |   |

 

5.               EARNINGSPER SHARE

 

The following table sets forth the computation ofbasic and diluted earnings per share in accordance with SFAS No. 128, *Earnings per Share*. The Company distributed a three-for-two stock split, effected in theform of a 50% stock dividend on July 16, 2004 to the shareholders ofrecord as of the close of business on June 30, 2004.  On November 15, 2004 the Board ofDirectors approved a three-for-two stock split, effected in the form of a 50%stock dividend, to shareholders of record as of the close of business on November 22,2004.  The stock split was distributed onDecember 13, 2004 and increased the number of shares outstanding by 15,061,379net of 82.5 fractional shares for which cash dividends were paid.  All share and per share amounts disclosed inthis document pertaining to the three-month period ended August 31, 2004 havebeen retroactively adjusted to reflect these stock splits.

 

| ** **                                                                          | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                          | ** ** | **August 31,**            | ** ** | **August 31,** | ** ** |
| ** **                                                                          | ** ** | **2005**                       | ** ** | **2004** | ** ** |
| Numerator for  basic and diluted earnings per share:                                |       |                           |       |   |   |
| Income available  to common shareholders                                            |       | $                              | 8,005,676  |   | $ | 4,948,953 |   |
|                                                                                |       |                           |       |   |   |
| Denominator:                                                                        |       |                           |       |   |   |
| For basic  earnings per share - weighted average shares basis                       |       | 45,541,734                     |       | 45,105,638 |   |
| Effect of  dilutive stock options and warrants                                      |       | 2,196,248                      |       | 2,453,214 |   |
| Denominator for  diluted earnings per share -adjusted weighted average shares basis |       | 47,737,982                     |       | 47,558,852 |   |
| Earnings per  common share                                                          |       | $                              | 0.18       |   | $ | 0.11 |   |
| Earnings per  common share – assuming dilution                                 |       | $                              | 0.17       |   | $ | 0.10 |   |

 

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6.                    DOMESTICAND FOREIGN OPERATIONS

 

Information concerning the Company’s domestic andforeign operations is summarized below (in 000s):

 
| ** **                     | ** ** | **For the Three Months Ended August 31, 2005** | ** ** |
|--------------------------------|------------|-----------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan  (1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:         |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | $                                                   | 27,784     |   | $ | 2,702 |   | $ | 2,958 |   | $ | 2,283 |   | $ | 1,442 |   | $ | 2,074 |   | $ | — |   | $ | 39,243 |   |
| Affiliates                     |       | 2,197                                               |       | 485 |   | — |   | 86 |   | — |   | 44 |   | (2,812 | ) | — |   |
| Total                          |       | 29,981                                              |       | 3,187 |   | 2,958 |   | 2,369 |   | 1,442 |   | 2,118 |   | (2,812 | ) | 39,243 |   |
| Net instrument  revenues:      |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 1,312                                               |       | 474 |   | 242 |   | (58 | ) | 1 |   | 154 |   | — |   | 2,125 |   |
| Affiliates                     |       | 26                                                  |       | 723 |   | — |   | — |   | — |   | — |   | (749 | ) | — |   |
| Total                          |       | 1,338                                               |       | 1,197 |   | 242 |   | (58 | ) | 1 |   | 154 |   | (749 | ) | 2,125 |   |
| Net collagen  revenues:        |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 1,066                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,066 |   |
| Affiliates                     |       | —                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 1,066                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,066 |   |
| Net Sales                      |       | 32,385                                              |       | 4,384 |   | 3,200 |   | 2,311 |   | 1,443 |   | 2,272 |   | (3,561 | ) | 42,434 |   |
|                           |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 11,053                                              |       | 129 |   | 148 |   | 931 |   | 87 |   | 172 |   | (39 | ) | 12,481 |   |
| Net income  (loss)             |       | 7,012                                               |       | 71 |   | 126 |   | 606 |   | 63 |   | 153 |   | (25 | ) | 8,006 |   |
|                                |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **For the Three Months Ended August 31, 2004** | ** ** |
|--------------------------------|------------|-----------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:         |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | $                                                   | 18,591     |   | $ | 3,097 |   | $ | 2,859 |   | $ | 1,860 |   | $ | — |   | $ | 2,102 |   | $ | — |   | $ | 28,509 |   |
| Affiliates                     |       | 2,166                                               |       | 640 |   | — |   | 6 |   | — |   | 20 |   | (2,832 | ) | — |   |
| Total                          |       | 20,757                                              |       | 3,737 |   | 2,859 |   | 1,866 |   | — |   | 2,122 |   | (2,832 | ) | 28,509 |   |
| Net instrument  revenues:      |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 1,852                                               |       | 403 |   | 101 |   | 15 |   | — |   | 433 |   | — |   | 2,804 |   |
| Affiliates                     |       | 378                                                 |       | 886 |   | 12 |   | — |   | — |   | — |   | (1,276 | ) | — |   |
| Total                          |       | 2,230                                               |       | 1,289 |   | 113 |   | 15 |   | — |   | 433 |   | (1,276 | ) | 2,804 |   |
| Net collagen  revenues:        |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 789                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 789 |   |
| Affiliates                     |       | —                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 789                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 789 |   |
| Net Sales                      |       | 23,776                                              |       | 5,026 |   | 2,972 |   | 1,881 |   | — |   | 2,555 |   | (4,108 | ) | 32,102 |   |
|                           |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 7,161                                               |       | (70 | ) | 222 |   | 678 |   | — |   | 74 |   | 40 |   | 8,105 |   |
| Net income  (loss)             |       | 4,243                                               |       | (43 | ) | 235 |   | 428 |   | — |   | 78 |   | 8 |   | 4,949 |   |
|                                |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)   The Company acquired its majority ownedJapanese subsidiary on July 5, 2005.

 

TheCompany’s U.S. operations made net export sales to unaffiliated customers ofapproximately $1.4 million and $1.8 million for the three months ended August 31,2005 and August 31, 2004, respectively. The Company’s German operations made net export sales to unaffiliatedcustomers of approximately****$0.5 million and$1.1 million for the three months ended August 31, 2005 and August 31,2004, respectively.  The Company’sCanadian operations made net export sales to unaffiliated customers ofapproximately****$0.5 million and $0.5 million forthe three months ended August 31, 2005 and August 31, 2004,respectively.  Intercompany product salesare valued at market prices.

 

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7.               COMPREHENSIVEINCOME

 

Comprehensive income for the three-month periods endedAugust 31, 2005 and August 31, 2004 is as follows:

 

| ** **                                  | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------------------|------------|--------------------------------|------------|
| ** **                                  | ** ** | **August 31,**            | ** ** | **August 31,** | ** ** |
| ** **                                  | ** ** | **2005**                       | ** ** | **2004** | ** ** |
|                                        |       |                           |       |   |   |
| Net income                                  |       | $                              | 8,005,676  |   | $ | 4,948,953 |   |
| Foreign currency translation adjustment     |       | 410,137                        |       | 368,796 |   |
| Hedge loss reclassified to interest expense |       | 5,137                          |       | 5,137 |   |
| Comprehensive income                        |       | $                              | 8,420,950  |   | $ | 5,322,886 |   |

 

8.               IMPACTOF RECENTLY ISSUED ACCOUNTING STANDARDS

 

In November 2004,the FASB issued SFAS No. 151, *Inventory Costs—anamendment of ARB No. 43, Chapter 4* (“SFAS No. 151”)*. *SFAS No. 151amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter4, previously stated that “. . . under some circumstances, items such as idlefacility expense, excessive spoilage, double freight, and rehandling costs maybe so abnormal as to require treatment as current period charges. . . “ SFAS No. 151requires that those items be recognized as current-period charges regardless ofwhether they meet the criterion of “so abnormal.” In addition, SFAS No. 151requires that allocation of fixed production overheads to the costs ofconversion be based on the normal capacity of the production facilities.  This new standard is effective for inventorycosts incurred during fiscal years beginning after June 15, 2005.  The Company is in the process of evaluatingthe impact SFAS No. 151 will have upon adoption but does not anticipate itwill have a significant impact on its financial statements.

 

In December 2004,the FASB issued SFAS No. 153, **Exchangesof Nonmonetary Assets**, *an amendment of APBOpinion No. 29*, **Accountingfor Nonmonetary Transactions****(“SFAS No. 153”)*.*  The amendments made by SFAS No. 153 arebased on the principle that exchanges of nonmonetary assets should be measuredbased on the fair value of the assets exchanged. Further, the amendmentseliminate the narrow exception for nonmonetary exchanges of similar productiveassets and replace it with a broader exception for exchanges of nonmonetaryassets that do not have commercial substance. Previously, APB Opinion No. 29required that the accounting for an exchange of a productive asset for a similarproductive asset or an equivalent interest in the same or similar productiveasset should be based on the recorded amount of the asset relinquished. Byfocusing the exception on exchanges that lack commercial substance, the FASBbelieves SFAS No. 153 produces financial reporting that more faithfullyrepresents the economics of the transactions. This statement is effective for nonmonetary asset exchanges occurring infiscal periods beginning after June 15, 2005.  The Company does not believe the adoption ofthis new statement will have a material impact on its financial statements.

 

In December 2004,the FASB issued SFAS No. 123 (revised 2004), *Share-Based Payment*(“SFASNo. 123(R)”), which is a revision of SFAS No. 123,*Accounting for Stock-Based Compensation*. Generally, the approach in SFAS No. 123(R) is similar to theapproach described in SFAS No. 123.  However, SFAS No. 123(R) requires all share-based payments toemployees, including grants of employee stock options, to be recognized in thestatement of income based on their fair values. Pro forma disclosure is nolonger an alternative. Upon issuance, SFAS No. 123(R) required publiccompanies to apply the provisions of the Statement in the first interim orannual reporting period beginning after June 15, 2005. In April 2005,the Securities and Exchange Commission approved a new rule that delays theeffective date, requiring public companies to apply SFAS No. 123(R) in thefirst annual period beginning after June 15, 2005. Except for the

 

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deferral of the effectivedate, the guidance in SFAS No. 123(R) is unchanged. The Company expects toadopt SFAS No. 123(R) in its first interim period of fiscal 2007 using themodified retrospective method whereby prior period results are restated toreflect the impact of adoption of SFAS No. 123(R) and have concluded thatSFAS No. 123(R) will have a material impact on its financial position andresults of operations. The adoption of this statement should impact net incomeand earnings per share similar to the pro forma amounts disclosed for thethree-month periods ended August 31, 2005 and 2004 in Note 2 to theconsolidated financial statements. Actual results in future periods, however, may differ from the pro formaresults reflected in Note 2 due to an increase or decrease in grants ofemployee stock options and/or changes in assumptions, such as the use ofestimated versus actual forfeitures or a change in expected life.

 

In March 2005, theFASB issued Interpretation No. 47, *Accountingfor Conditional Asset Retirement Obligations—an interpretation of FASBStatement No. 143 (“FIN No. 47”).*FIN No. 47 clarifies that the term conditional assetretirement obligation as used in SFAS No. 143, *Accounting for Asset Retirement Obligations,* refers to alegal obligation to perform an asset retirement activity in which the timingand (or) method of settlement are conditional on a future event that mayor may not be within the control of the entity. The obligation to perform theasset retirement activity is unconditional even though uncertainty exists aboutthe timing and (or) method of settlement. Thus, the timing and(or) method of settlement may be conditional on a future event.Accordingly, an entity is required to recognize a liability for the fair valueof a conditional asset retirement obligation if the fair value of the liabilitycan be reasonably estimated. FIN No. 47 also clarifies when an entitywould have sufficient information to reasonably estimate the fair value of anasset retirement obligation. FIN No. 47 is effective no later than the endof fiscal years ending after December 15, 2005. The Company is in theprocess of evaluating the impact FIN No. 47 will have upon adoption butdoes not anticipate it will have a significant impact on its financialstatements.

 

In May 2005, theFASB issued SFAS No. 154, *Accounting Changes andError Corrections* (“SFAS No. 154”), which replaces APB Opinion No. 20,*Accounting Changes*, and SFAS No. 3,*Reporting Accounting Changes in Interim FinancialStatements-An Amendment of APB Opinion No. 28*.  SFAS No. 154 provides guidance on theaccounting for and reporting of accounting changes and error corrections. Itestablishes retrospective application, or the latest practicable date, as the requiredmethod for reporting a change in accounting principle and the reporting of acorrection of an error. SFAS No. 154 is effective for accountingchanges and corrections of errors made in fiscal years beginning after December 15,2005. The Company does not expect the adoption of SFAS No. 154 to have amaterial impact on its financial statements.

 

9.               STOCKSPLITS

 

On June 1,2004, the Board of Directors approved a three-for-two stock split, effected inthe form of a 50% stock dividend, to shareholders of record as of the close ofbusiness on June 30, 2004.  Thestock split was distributed on July 16, 2004 and increased the number ofshares outstanding by 10,066,940, net of 326 fractional shares for which cashdividends were paid. On November 15, 2004 the Board of Directors approveda three-for-two stock split, effected in the form of a 50% stock dividend, toshareholders of record as of the close of business on November 22,2004.  The stock split was distributed onDecember 13, 2004 and increased the number of shares outstanding by15,061,379 net of 82.5 fractional shares for which cash dividends werepaid.  The stock splits were the sixthand seventh for the Company since its initial public offering in December 1985.  Previously, the Company implemented athree-for-two stock split in 2003, a three-for-two split in 2002, athree-for-two split in 1991, a five-for-four split in 1990, and a five-for-foursplit in 1987.  All share and per shareamounts disclosed in this document pertaining to the three-month period ended August 31,2004 have been retroactively adjusted to reflect the stock splits describedabove.

 

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10.         STOCKREPURCHASE PROGRAM

 

TheCompany instituted a stock repurchase program in June 1998 for up to4,050,000 shares, of which 3,624,750 shares had been purchased prior to the endof the 2004 fiscal year, leaving 425,250 shares available for repurchase.  On June 1, 2004, the Board of Directorsauthorized the Company to repurchase up to an additional 450,000 shares of itscommon stock.  On August 2, 2004,the Board of Directors authorized the Company to repurchase up to an additional750,000 shares of its common stock. During the three-month period ended August 31, 2004, the Companyrepurchased 622,500 shares at an average per share price of $12.87, bringingthe aggregate number of shares to 4,247,250 repurchased to date sinceimplementation of the 1998 repurchase program. No shares were repurchasedduring the remainder of fiscal 2005 or during the first quarter of fiscal2006.  An aggregate of 1,002,750 sharesremain authorized for repurchase under the program.

 

11.         LITIGATION AND OTHER MATTERS

 

Aspreviously reported, the Company’s Italian subsidiary and Dr. GioacchinoDe Chirico, the former President of the Italian subsidiary, became the subjectsof a criminal investigation in Milan, Italy centered on payments by severalcompanies to an Italian physician allegedly in exchange for favorable contractawards by his hospital. This development prompted the Company to initiate aninternal investigation, which was conducted by the Audit Committee of the Boardof Directors.  The internal investigationdetermined that the physician rendered services as the organizer and chairmanof a convention sponsored by the Italian subsidiary in October 2003; theCompany paid the physician 13,500 Euro in April 2004 for those services;and the payment was not improper. However, the invoice for those services did not properly identify thedoctor or the nature of his services, in violation of the books and recordsprovisions of the Foreign Corrupt Practices Act.  In November 2004 the Company voluntarilyreported this violation to the SEC.  Theinternal investigation also addressed six payments to another physician in1998, 1999 and 2000 totaling approximately $47,000.  Based on the investigation it appears thosepayments may have been related not only to the performance of certain servicesbut also to the introduction of an instrument system into that physician’shospital and perhaps other hospitals.

 

TheCompany has made three voluntary submissions to the SEC, some of the Company’sofficers and one of the Company’s directors have voluntarily testified, and theCompany continues to cooperate with the SEC. The SEC has issued a formal investigative order in the matter, but hasyet to express to the Company any conclusions about the ultimate outcome of itsinvestigation.  The Company has also haddiscussions with the Italian prosecutor concerning his investigation, but hehas not expressed to the Company any conclusions about the ultimate outcome ofthe investigation.  The Italianinvestigation is continuing and has been expanded to several other companiesnot related to Immucor, which may delay the closure of this matter in Italy.  No determination can yet be made as towhether, in connection with these circumstances, the Company will becomesubject to any fines, penalties and/or other charges imposed by anygovernmental authority, or any other damages or costs that may arise in connectionwith these circumstances.

 

The Company is aware of seven class-action lawsuitshaving been filed in the United States District Court for the Northern Districtof Georgia against the Company and certain of its current and former directorsand officers with respect to alleged violations of the securities laws.  All of the actions essentially duplicate oneanother, pleading essentially the same allegations.  The complaints filed in the lawsuits allegeviolations of Sections 10(b) and 20(a) of the Securities Exchange Actof 1934 and Rule 10b-5 promulgated thereunder, specifically alleging,among other things, that the Company misrepresented that its financialstatements and disclosures during portions of the 2005 calendar year fairly andaccurately reflected the Company’s results of operations, which allegedlyresulted in the purchase of the Company’s common stock at artificially inflatedmarket prices.  The lawsuits seekcompensatory and other damages, and costs and expenses associated with thelitigation.  The Company believes thateach of the lawsuits is without merit, and intends to defend each of theselawsuits vigorously.  While the Companydoes not currently expect these matters to materially affect its financialcondition or results of operations, there can be no assurance of any particularoutcome.

 

In September2005, F. Baragano Pharmaceuticals filed suit against the Company in the U.S.District Court for the District of Puerto Rico, alleging that the Companycancelled a distribution contract without just cause, and is seeking $350,000plus interest, costs and attorney fees. The Company is defending itself against this lawsuit, but at this timeis not able to determine the probability of a favorable or unfavorable outcomeor an estimate of the amount or range of possible loss.

 

TheCompany's compliance with its Affirmative Action Plan is being audited by theUS Department of Labor's Office of Federal Contract Compliance Programs (OFCCP)concerning personnel activity from July 1, 2003 through June 30, 2004 andJuly 1, 2004 through February 13, 2005. If OFCCP determines that a violation of Federal antidiscriminationstatutes has occurred, it has the power to order remedial action.  Due to the preliminary nature of this matter,we are not yet able to determine whether the Company will become subject to anysuch remedial action.

 

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Other than as set forth above, the Company is notcurrently subject to any material legal proceedings, nor, to the Company’sknowledge, is any material legal proceeding threatened against the Company.However, from time to time, the Company may become a party to certain legalproceedings in the ordinary course of business.

 

12.         CANCELLATIONOF GROUP PURCHASING CONTRACTS

 

The Companymutually agreed with two group purchasing organizations to cancel supplyagreements. TheCompany’s contracts with Novation and Premier were cancelled effective January 10,2005 and January 26, 2005, respectively. These cancellations wereundertaken for the purpose of increasing prices to the members of each groupwhich occurred simultaneously with each cancellation. These groups contributeapproximately $24.9 million in revenues to Immucor annually.  These cancellations are also expected toresult in the Company paying approximately $0.8 million less in annualadministration fees to the groups.

 

13.         DEFERREDINSTRUMENT COSTS

 

Incertain limited situations involving third-party leasing arrangements, theCompany enters into a repurchase agreement whereby if the ultimate customerterminates the lease, the Company agrees to repurchase the instrument for anamount equal to the remaining unpaid lease payments owed to the third-partyleasing company.  In these limitedsituations, the Company continues to defer the revenue related to the sale andsubsequently recognizes the revenue over the lease term as the lease paymentsare made to the third-party leasing company and it is clear that the ultimatecustomer has not terminated the related lease. In prior periods, the Company also deferred the corresponding cost ofthese instrument sales and recognized the costs over the same period as therelated revenue.  During the quarterended February 28, 2005, the Company determined that it was moreappropriate to recognize the instrument costs in these deferral situations whenthe instrument has been installed and written acceptance has been received fromthe customer.  Accordingly, for thequarter ended February 28, 2005, the Company recorded additional cost ofsales totaling approximately $327,000 which related to prior quarters.  The Company now records all such instrumentcosts at the time the instrument is installed and accepted by the customer andtitle has legally transferred to the customer.

 

14.         SUBSEQUENTEVENTS

 

On October 31,2005 the Board of Directors of the Company approved a plan to close the Company’sHouston, Texas manufacturing facility.

 

Thedecision to close the facility was driven by a number of factors including, inparticular, the expense of operating two separate FDA licensed manufacturingfacilities.  This closure, which issubject to certain regulatory approvals, is scheduled to occur in December 2007.

 

As aresult of this closure plan, the Company expects to incur an estimatedafter-tax charge to earnings of approximately $2.0 million to $3.0 million,including approximately $1.5 million to $2.0 million in estimated after-taxasset impairment charges. The remaining projected after-tax closure costs ofapproximately $0.5 million to $1.0 million consists of approximately $0.3million to $0.6 million in costs to consolidate operations and relocateassociated employees and approximately $0.2 million to $0.4 million in one-timeemployee termination costs. The employee relocation costs will be expensed whenincurred.  The one-time termination costswill be expensed ratably over the related required service period and consistof approximately $0.1 million to $0.3 million in stay-on bonuses andapproximately $0.1 million in severance payments and outplacement assistance.

 

Netcash outlays related to the consolidation of operations, relocation ofemployees, and employee termination costs are expected to be approximately $1.0million to $1.5 million to be paid out over the 2006 and 2007 fiscal years.

 

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## **ITEM2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**.

 

*Certain statements that Immucor may make from time to time, including all statements contained in this report that are not statements of historical fact, constitute “forward-looking statements” under the federal securities laws. Forward-looking statements may be identified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,” “will,” “should” and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, FDA and other regulatory applications and approvals, market position and expenditures.  Factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Immucor include the following, some of which are described in greater detail below:  the decision of customers to defer capital spending; increased competition in the sale of instruments and reagents; product development or regulatory obstacles; the ability to hire and retain key managers; changes in interest rates and foreign currency exchange rates; changes in demand for the Company’s human collagen product; the ability of the Company’s Japanese subsidiary to attain expected revenue, gross margin and net income levels; delays in regulatory approvals or other unforeseen delays related to the Company's plans to move Houston manufacturing to another Company facility; higher than expected costs related to the planned closure of the Houston facility; higher than expected manufacturing consolidation costs; problems in efficiently producing products after the consolidation; the outcome of any legal claims known or unknown; and general economic conditions. In addition, the strengthening of the dollar versus the Euro would adversely impact reported European results.  Investors are cautioned not to place undue reliance on any forward-looking statements.  Immucor cautions that historical results should not be relied upon as indications of future performance.  Immucor assumes no obligation to update any forward-looking statements.*

 

**CriticalAccounting Policies**

 

*General*

 

We have identified thepolicies below as critical to our business operations and the understanding ofour results of operations. The impact and any associated risks related to thesepolicies on our business operations is discussed throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations wheresuch policies affect our reported and expected financial results.  For a detailed discussion on the applicationof these and other accounting policies, see Note 1, Note 2 and Note 8 to the consolidatedfinancial statements of this Quarterly Report on Form 10-Q.  Note that our preparation of this Form 10-Qrequires us to make estimates and assumptions that affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilitiesat the date of our financial statements, and the reported amounts of revenueand expenses during the reporting period. Actual results could differ fromthose estimates, and certain assumptions could prove to be incorrect.  Senior management has discussed thedevelopment and selection of critical accounting estimates and relatedManagement’s Discussion and Analysis of Financial Condition and Results ofOperations disclosure with the Audit Committee of the Board of Directors.

 

*RevenueRecognition*

 

The Company recognizesrevenue when the following four basic criteria have been met:  (1) persuasive evidence of anarrangement exists; (2) delivery has occurred or services rendered; (3) thefee is fixed and determinable; and (4) collectibility is reasonablyassured.  Should changes in conditionscause management to determine these criteria are not met for certain futuretransactions, revenue recognized for any reporting period could be adverselyaffected.

 

•                  Reagent sales

 

Revenuefrom the sale of the Company’s reagents in the U.S. market is generallyrecognized upon shipment when both title and risk of loss transfer to thecustomer upon shipment.  Revenue from thesale of the Company’s reagents in the export market is recognized FOB customsclearance when both title and risk of loss transfer to the customer.

 

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•                  Human collagen and collagenby-product sales

 

Revenuefrom the sale of the Company’s human collagen product and from the sale ofby-products of collagen is recognized upon shipment and either passage of a 10-dayinspection period (or, for by-products of collagen, passage of a 30-dayinspection period) or upon receipt of notification of customer acceptance.  In accordance with a revenue-sharingagreement between the Company and the Company’s human collagen customer,revenue from the sale of by-products is allocated 66.7% to the Company and33.3% to the collagen customer.

 

•                  Medical instrument sales

 

Revenuefrom the sale of the Company’s medical instruments is generally recognized uponshipment and completion of contractual obligations relating to training and/orinstallation based on terms of the related agreements.  Revenue from rentals of the Company’s medicalinstruments is recognized over the life of the rental agreement.  Instrument service contract revenue isrecognized over the life of the contract.

 

TheCompany recognizes revenue on the sale of medical instruments in accordancewith Emerging Issues Task Force (“EITF”) Issue No. 00-21, *Accounting for Revenue Arrangements with MultipleDeliverables*, for agreements entered into beginning in the secondquarter of fiscal year 2004.  The Company’smedical instrument sales contracts involve multiple deliverables, including thesale or rental of an instrument (including training), the subsequent servicingof the instrument during the first year, reagent products provided to thecustomer during the validation period and, in some cases, price guarantees forconsumables purchased during the contract period and/or a software interface tobe provided to the customer.  The Companyhas determined the fair value of certain of these elements, such as training,validation reagents, and first year service. The portion of the instrument sales price applicable to the instrumentitself is recognized upon shipment and completion of contractual obligationsrelating to training and/or installation based on the terms of the relatedagreement. If the agreement does not include any price guarantees, the salesprice in excess of the fair values of training, validation reagents, andservice is allocated to the instrument itself using the residual method.  The fair value of at least one customertraining session is recognized as revenue when the instrument itself isrecognized, provided that training has been provided. If multiple sessions arecontractually provided for, and not all training has been complete at the timethe instrument is recognized, additional training revenue is recognized upon delivery.The fair value of reagent products provided to the customer during thevalidation period is also recognized when the instrument itself isrecognized.  The fair value of first yearservice is deferred and recognized over the first year of the contract.  The Company believes it not possible todetermine the fair value of price guarantees. If the agreement contains price guarantees, the entire sales price isdeferred and recognized over the guarantee period.  The allocation of the total consideration receivedbased on the estimated fair value of the units of accounting requires judgmentby management.

 

Incertain limited situations involving third-party leasing arrangements, theCompany enters into a repurchase agreement whereby if the ultimate customerterminates the lease, the Company agrees to repurchase the instrument for anamount equal to the remaining unpaid lease payments owed to the third-partyleasing company.  In these limitedsituations, the Company continues to defer the revenue related to the sale andsubsequently recognizes the revenue over the lease term as the lease paymentsare made to the third-party leasing company and it is clear that the ultimatecustomer has not terminated the related lease. In prior periods, the Company also deferred the corresponding cost ofthese instrument sales and recognized the costs over the same period as therelated revenue.  During the fiscalquarter ended February 28, 2005, the Company determined that it was moreappropriate to recognize the instrument costs in these deferral situations whenthe instrument has been installed and written acceptance has been received fromthe customer.  Accordingly, during thefiscal quarter ended

 

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February 28,2005, the Company recorded additional cost of sales totaling approximately$327,000, which was related to prior quarters but which was not material to anysingle quarter.  The Company now recordsall instrument costs at the time the instrument is installed and accepted bythe customer and title has legally transferred to the customer.

 

•                  Sales subject to a plan offactoring

 

Sales subject to a plan of factoring are recorded attheir net realizable value (defined as gross sales less the annual estimatedcost of factoring the sale).  Should thefactored sale remain uncollected by the factor at the end of one year, anestimate of the additional factoring discount is made and recorded monthly asan additional reduction of sales revenue.

 

•                  Shipping and handling charges

 

Theamounts charged customers for shipping and handling of orders are classified asrevenue and reported as invoiced in the statement of operations as net sales. 

 

*Allowancefor Doubtful Accounts*

 

Immucor maintains anallowance for doubtful accounts for estimated losses resulting from theinability of its customers to make required payments.  The Company’s current policy for its NorthAmerican affiliates, based on historical collection experience, is to providean allowance of 2% of domestic third-party gross receivables and an allowanceof 10% of international third-party gross receivables.  The Company’scurrent policy for all other affiliates, based on historical collectionexperience, is to provide an allowance of 4% of all third-party grossreceivables. In addition, any third-party invoices over three years oldare also provided for in the allowance. At August 31, 2005, the allowance is approximately 5.3% of thegross accounts receivable balance. The Company continually monitors thecollectibility of its customer accounts and when indications arise that anamount is not likely to be collected, the amount is charged to the allowancefor doubtful accounts.  If the financialcondition of any of Immucor’s customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances could berequired.

 

*Inventory*

 

Inventories are stated atthe lower of first-in, first-out cost or market.  Cost includes material, labor andmanufacturing overhead.  The Company usesa standard cost system as a tool to monitor production efficiency.  The standard cost system applies estimatedlabor and manufacturing overhead factors to inventory based on budgetedproduction and efficiency levels, staffing levels and costs of operation, basedon the experience and judgment of management. Actual costs and production levels may vary from the standardestablished and are charged to the consolidated statement of income as acomponent of cost of sales.  Since U.S.generally accepted accounting principles require that the standard costapproximate actual cost, periodic adjustments are necessary.  The provision for obsolete and/or excessinventory is reviewed on a quarterly basis. All finished good reagent products which will expire in less than sixmonths are reserved in the period in which this expiration threshold ismet.  Any raw, intermediate, or finishedproduct that has been quarantined because it has failed quality control (QC) isreserved in the period in which the product fails QC testing.  Should the product be successfully reworkedand pass final quality control checks, it is then valued at its standardcost.  Obsolete and quarantined inventoryis physically segregated from useable and saleable inventory and destroyedaccording to regulatory and fiscal guidelines. No material changes have been made to the inventory policy during the three-monthperiod ended August 31, 2005.

 

*Excess ofCost Over Net Tangible Assets Acquired and Other Long-lived Assets*

 

In assessing therecoverability of the Company’s excess of cost over net tangible assetsacquired and other long-lived assets the Company must make assumptionsregarding estimated future cash flows and other factors to determine the fairvalue of the respective assets. If these estimates or their related assumptionschange in the future, the Company

 

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may be required to recordimpairment charges not previously recorded for these assets. In accordance withSFAS No. 142, *Goodwill and OtherIntangible Assets*, the Company analyzes its goodwill and intangibleassets for impairment on an annual basis or more frequently if impairmentindicators arise.

 

*IncomeTaxes*

 

Our income tax policyrecords the estimated future tax effects of temporary differences between thetax bases of assets and liabilities and amounts reported in the accompanyingconsolidated balance sheets, as well as operating loss and tax creditcarry-forwards. The Company follows very specific and detailed guidelinesregarding the recoverability of any tax assets recorded on the balance sheetand provides any allowances as required. The Company believes that the value of the Company’s deferred tax assetsassumes that the Company will be able to generate sufficient future taxableincome in certain tax jurisdictions, based on estimates and assumptions. Ifthese estimates and related assumptions change in the future, the Company maybe required to record additional valuation allowances against its deferred taxassets resulting in additional income tax expense in the Company’s consolidatedstatements of income. In assessing the realizability of deferred tax assets,management considers whether it is more likely than not that some portion orall of the deferred tax assets will not be realized.  Management considers the scheduled reversalof deferred tax liabilities, projected future taxable income, carry-backopportunities, and tax-planning strategies in making this assessment.  Management evaluates the realizability of thedeferred tax assets and assesses the need for additional valuation allowancesquarterly.  No material changes have beenmade to the income tax policy during the three-month period ended August 31,2005.

 

*Stock-BasedEmployee Compensation*

 

The Company currentlyaccounts for stock option grants in accordance with APB Opinion No. 25, *Accounting for Stock Issued to Employees. *Accordingly, the Companyrecognizes compensation expense only if the stock price on the grantmeasurement date exceeds the exercise price (i.e. the grant has intrinsicvalue).  In such a case, the intrinsicvalue of the grant is recognized as compensation expense over the four-yearvesting period of the grant.  Prior tofiscal 2005, the Company granted stock options for a fixed number of shares toemployees with an exercise price equal to the fair value of the shares at thegrant measurement date – therefore, these grants had no intrinsic value and,accordingly, no compensation expense was recorded regarding these grants.  Beginning in fiscal 2005, the Company beganawarding grants to eligible new hires with the respective exercise price equalto the closing price on the business day immediately prior to the grant measurementdate — therefore in these cases, the exercise price may be higher or lower thanthe fair value of the shares at the measurement date of grant.  However, due to the small number of sharesgranted to new hires and the insignificant differences between the prices onthe grant measurement days and the exercise prices of these new hire grants,the Company has determined that the aggregate intrinsic value of all suchgrants to date is not material to any fiscal period reported and has thereforenot recognized compensation expense regarding these new hire grants.

 

The Company also grantsstock options to certain employees as a result of their respectivepromotions.  As such grants have anexercise price equal to the fair value of the shares at the measurement date ofgrant, no compensation expense is recognized on these grants as such expense isnot required to be recognized under APB Opinion No. 25.

 

From time to time, theCompany awards grants of stock options to certain groups of employees.  In regards to a group grant, the Company hasrecorded compensation expense totaling approximately $35,000, net of taxes of$19,000, in the quarter ended August 31, 2005, as the fair value of theshares on the grant measurement date exceeded the exercise price.   Compensation expense for this group grant isbeing recorded over the four-year vesting period which will end in fiscal 2009.

 

In December 2002,the FASB issued SFAS No. 148, *Accounting for Stock-basedCompensation – Transition and Disclosure – an amendment of FASB Statement No. 123. *SFAS No. 148 providesalternative methods of transition for a voluntary change to the fair valuebased method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends thedisclosure requirements of SFAS No. 123 to require prominent disclosuresin both annual and interim financial statements about the method of accountingfor stock-based employee compensation

 

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and the effect of themethod used on reported results.  TheCompany adopted the interim disclosure requirements in the period ended May 31,2003.  See Note 2 to the consolidatedfinancial statements.

 

In December 2004, the FASB issued SFAS No. 123(revised 2004), *Share-Based Payment*(“SFAS No. 123(R)”), which is arevision of SFAS No. 123,*Accountingfor Stock-Based Compensation*.  Generally, the approach in SFAS No. 123(R)is similar to the approach described in SFAS No. 123.  However, SFAS No. 123(R)requires all share-basedpayments to employees, including grants of employee stock options, to berecognized in the statement of income based on their fair values. Pro formadisclosure is no longer an alternative. Upon issuance, SFAS No. 123(R)required public companies to apply the provisions of the Statement in the firstinterim or annual reporting period beginning after June 15, 2005. In April 2005,the Securities and Exchange Commission approved a new rule that delays theeffective date, requiring public companies to apply SFAS No. 123(R) in thefirst annual period beginning after June 15, 2005. Except for the deferralof the effective date, the guidance in SFAS No. 123(R) is unchanged. Weexpect to adopt SFAS No. 123(R) in our first interim period of fiscal 2007using the modified retrospective method whereby prior period results arerestated to reflect the impact of adoption of SFAS No. 123(R) and haveconcluded that SFAS No. 123(R) will have a material impact on ourfinancial position and results of operations. The adoption of this statementshould impact net income and earnings per share similar to the pro formaamounts disclosed for the three-month periods ended August 31, 2005 and2004 in Note 2 to the consolidated financial statements.  Actual results in future periods, however,may differ from the pro forma results reflected in Note 2 due to an increase ordecrease in grants of employee stock options and/or changes in assumptions,such as the use of estimated versus actual forfeitures or a change in expectedlife.

 

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**Overview**

 

Founded in 1982, Immucor, Inc.,a Georgia corporation (“Immucor” or the “Company”), develops, manufactures andsells a complete line of reagents and automated systems used primarily byhospitals, clinical laboratories and blood banks in a number of tests performedto detect and identify certain properties of the cell and serum components ofhuman blood prior to blood transfusion.  TheCompany’s strategy is to strengthen its leadership position in the automationof blood bank testing by continuing to expand its base of installedinstruments. To facilitate instrument placements, the Company offers customersa selection of automated analyzers, which address the various needs of low,medium, and high-volume testing facilities. The Company utilizes a “razor/razorblade” business model.  The Company’s instruments are designed tooperate with the Company’s proprietary reagents.  Therefore, once a customer procures aninstrument from the Company, the customer is likely to continue to purchaseproprietary reagents from the Company for use with the instrument on a going-forwardbasis.  In order to satisfy the broadspectrum of customers’ operational and financial criteria, the Company intendsto continue to offer several instrument procurement options, includingthird-party financing leases, direct sales and reagent rentals and to expandthe range and price points of its instrument offerings.

 

For fiscal 2006, theCompany is continuing to focus on improving gross margin through continuing toimplement strategies already in place prior to May 31, 2005, as well asthrough the implementation of new strategies. Gross margin increased to 62.9% for the quarter ended August 31,2005 from 57.0% for the quarter ended August 31, 2004.  As further discussed below under “Results ofOperations,” the improvement in gross margin during the quarter ended August 31,2005, as compared to the prior year period, was due primarily to the following:

 

•                  Reagent price increases, attributablein part to the cancellation of supply agreements with two group purchasingorganizations in January 2005 in order to increase member purchasingprices as well as reduce administrative fees associated with these contracts;

 

•                  Increased Capture revenues, drivenprimarily by the kit-to-component changeover implemented in the third quarterof fiscal 2005, as well as placement of additional instruments which requireuse of this technology; and

 

•                  Increased manufacturing efficienciesdue in part to the continued elimination of a number of redundant productspreviously manufactured at the Company’s three manufacturing facilities.

 

Listed below are the key factors which the Company expects to drivefurther gross margin improvement during the remainder of fiscal 2006:

 

•                  Impact ofCustomer Loyalty Program

 

This program has been built upon the standardized tierpricing structure first implemented in fiscal 2005.  As with the structure implemented in fiscal2005, there are three pricing tiers – each representing differing levels ofcustomer loyalty, with the highest tier consisting of the lowest prices for anautomated instrument customer and the lowest tier consisting of the highestprices for the non-committed, occasional customer.  The program is intended to promote highersales volumes while partially shielding the Company’s more loyal customers fromthe effects of price increases.

 

•                  Impact ofGalileo increased market penetration

 

The Company expects Capture revenues to continue toincrease in fiscal 2006 over fiscal 2005, due to the continued impact of fiscal2005 Galileo placements as well as expected new placements in fiscal 2006.  In addition, service revenue is expected tocontinue to increase as the service warranty periods for prior year Galileoplacements expire and additional service contracts are purchased by customers.

 

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•                  Increased Japanese marketpenetration 

 

On July 5,2005, the Company acquired a 51% interest in Immucor-Kainos, Inc. – thenewly formed joint venture with the Company’s former Japanese distributor, KainosLaboratories, Inc. (“Kainos”).    Onthis date, the Company also signed a Stock Purchase Agreement, a mandatorilyredeemable financial instrument as defined by SFAS No. 150, to purchasethe remaining 49% interest from Kainos. The Company expects to purchase this remaining interest upon theexpiration of the three-year transition period which ends on June 30,2008, or sooner, upon the fulfillment of a 300 million Japanese Yen guaranteeliability to Kainos. The Company has accordingly recorded the present value ofthe 49% interest obligation as a liability which has been accounted for asadditional purchase price.  The Companybelieves the formation of this joint venture is a key step towards furtherpenetrating the Japanese transfusion diagnostics market, the third largest suchmarket in the world after Europe and the United States.  This acquisition has been accounted for as apurchase of a majority-owned subsidiary, the results of which have beenincluded in the Company’s consolidated statement of income from July 5,2005.

 

•                  Implementation of new Kiwi technology

 

In July 2005, theCompany selected the KODETM technology platform of with Kiwi Ingenuity Limited (“Kiwi”),a partner to Auckland University of Technology Biotechnology Research Institutefor use in creating a quality control system for blood group typing. Thistechnology allows for the attachment of molecules on to the outside of cells,thereby resulting in a quality control system for blood grouping.  The Company expects to begin using this newtechnology in manufacturing products beginning in late fiscal 2006, and expectsthat offering its customers heightened assurance as to the accuracy of testresults will provide the Company with an additional competitive advantage,thereby increasing overall revenues.  TheCompany expects to spend approximately $15,000 in research and developmentcosts regarding this technology in fiscal 2006.

 

•                  Increased manufacturingefficiencies

 

TheCompany expects to continue the process of eliminating redundant productscurrently manufactured at the Company’s three manufacturing facilities.

 

Additionally, the Company expects to continue increasing manufacturingefficiencies going into fiscal 2007 through implementation of a ManufacturingExecution System (“MES”), a new sales forecasting system, and a new marketingdatabase, the combination of which is expected to drive more accurateforecasting of product demand and resulting material and laborrequirements.  The new marketing databasewas implemented in June 2005.  Thenew sales forecasting system is expected to be implemented in January 2006.   MES is expected to be implemented in thefirst quarter of fiscal 2007. Furthermore, the recently announced planned closure of the Company’s Houstonfacility and the consolidation of manufacturing in the Company’s otherfacilities is expected to result in increased manufacturing efficienciesbeginning in fiscal 2008.  This closureis currently scheduled for December 2007. See Note 14 to the consolidated financial statements – Subsequent Eventsfor more details regarding this planned closure.

 

In addition to the above strategies, the Company expects to furtherimprove its competitive position going into fiscal 2007 through the launch ofits third generation automated assay instrument, which is expected to bereleased in the European market in the summer of 2006. At the American Associationfor Clinical Chemistry convention held in July 2005, the Company presenteda prototype of its new third generation instrument, the Galileo EchoTM.  Development of this instrument has furtherprogressed during fiscal 2005 with the Company accepting the manufacturer’sengineering model in late fiscal 2005. The Galileo EchoTM is expected to be significantly smaller and fasterthan the ABS2000, and have substantially all of the features of the Company’slarger Galileo product, apart from lower throughput.  The Company believes the new instrument willappeal to the small- to medium-sized hospital market, the largest segment ofits customers (which number approximately 5,000 to 6,000 worldwide), to whichthe Company’s ABS2000 instrument is currently marketed.  The cost of development is expected to totalapproximately $2.0 million in fiscal 2006.

 

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**Liquidity and Capital Resources**

 

As of August 31,2005, the Company’s cash and cash equivalents balance totaled $46.8 million.  Net cash provided by operating activitiesincreased to $19.4 million for the three months ended August 31, 2005, up $10.7million from the same period ended August 31, 2004.  This increase was primarily driven by changesin working capital – primarily in deferred revenues and in inventories — aswell as higher net income.

 

For the three months endedAugust 31, 2005, $8.5 million of cash was used in investing activities primarilyfor the following:  (1) acquisitionof a 51% interest in Immucor-Kainos, Inc. ($4.7 million) – see Note 3 tothe consolidated financial statements, (2) capital expenditures ($2.6million), and (3) investments in held-to-maturity marketable securities($1.0 million).  The $2.6 million incapital expenditures for the three-month period ended August 31, 2005 consistedprimarily of $0.4 million for Galileo and other instruments used fordemonstration purposes by the sales force or placed at customer sites onreagent rental agreements to be depreciated over the life of the respectiveagreements, $1.6 million for machinery and equipment upgrades for use primarilyat the Company’s Norcross facility, and $0.6 million for computer hardware andsoftware enhancements of the enterprise software system.  Planned capital expenditures for fiscal 2006 totalapproximately $8.7 million.

 

A new three-way distribution agreement between Immucor, Kainos, and Immucor-Kainos, Inc. (the Company’s new majority owned subsidiary), executed on July 5, 2005, stipulates that Immucor-Kainos, Inc. guarantees that Kainos will receive a minimum net profit (as defined in the agreement) of 300 million Japanese Yen by the end of the three-year transition period ending June 30, 2008 on sales of Immucor product to Immucor-Kainos, Inc., with 125 million Japanese Yen to be received in each of the first two years and the remaining 50 million Japanese Yen in the third year.  The agreement expires on May 30, 2009, but may be terminated sooner (1) upon mutual agreement of the parties, (2) at the end of the transition period, or (3) upon Kainos’ attainment of the minimum guaranteed net profit.  As of August 31, 2005, approximately 22 million Japanese Yen (or approximately $202,000) of the guarantee had been received by Kainos in accordance with the terms of the distribution agreement.  See Note 3 to the consolidated financial statements.

 

Net cash used infinancing activities totaled approximately $1.1 million and $10.0 million forthe three months ended August 31, 2005 and 2004, respectively. Themajority of the usage of cash for the current year period is attributable to$1.0 million repayment of principal on long term debt.  The Company’s $27.0 million secured creditfacility with SunTrust Bank — comprised of a $15.0 million revolver and a $12.0million term loan — matures in December 2006.  The term loan is payable in quarterlyinstallments of $1.0 million.  The termloan and the revolver bear interest of LIBOR plus additional percentage pointsranging from 1.0% to 1.75%, or SunTrust Bank prime rate plus additional percentagepoints ranging from (0.5%) to 1.0% based on certain calculations as defined inthe Loan Agreement.  The loans arecollateralized by the capital stock of certain of the Company’ssubsidiaries.  As of August 31, 2005,there was $5.0 million outstanding on the term loan and none outstanding on therevolver.

 

The Company instituted a stock repurchase program in June of 1998for up to 4,050,000 shares, of which 3,624,750 shares had been purchased priorto the end of the 2004 fiscal year, leaving 425,250 shares available forrepurchase.  On June 1, 2004, theBoard of Directors authorized the Company to repurchase up to an additional 450,000shares of its common stock. On August 2, 2004, the Board of Directorsauthorized the Company to repurchase up to an additional 750,000 shares of itscommon stock.  In the quarter ended August 31,2004, the Company repurchased 622,500 shares at an average per share price of$12.87, bringing the aggregate number of shares to 4,247,250 repurchased todate since implementation of the 1998 repurchase program.  An aggregate of 1,002,750 shares remain authorizedfor repurchase under the program.  Noshares of common stock have been repurchased by the Company since the quarterended August 31, 2004.

 

At August 31, 2005and 2004, the Company had an interest rate swap agreement in the Company’sfunctional currency, maturing in September 2005 with an initial notionalprincipal amount of $15.0 million, which amortizes over the life of theinstrument.  The fair value of theinterest rate swap agreement represents the estimated receipts or payments thatwould be made to terminate the agreement. For the quarters ended August 31, 2005 and 2004, the Company wouldhave paid approximately $6,708 and $114,068, respectively, to terminate the agreementin the Company’s functional currency.  Theliabilities at August 31, 2005 and 2004 are included in Other accruedliabilities

 

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and Other liabilities,respectively, in the Consolidated Balance Sheets.  The interest rate swap agreement, withSunTrust Bank, is guaranteed by the Company. See Item 7A—Quantitative and Qualitative Disclosures About MarketRisk—Interest Rates.

 

The Company initiated in October 2004an internal investigation into certain events involving its Italiansubsidiary.  The internal investigationalso addressed the underpayment of value added tax (VAT) by our Italiansubsidiary.  All due but unpaid VAT hasnow been paid, with required interest, although the Italian tax authorities mayimpose a penalty for underpayment of VAT.

 

As of May 31, 2005, the Company had incurred approximately $2.6 million in professional fees over seven months associated with the previously reported internal investigation into certain events involving its Italian subsidiary.  During the quarter ended August 31, 2005, the Company had incurred an additional $0.8 million in professional fees associated with this matter.  Of the total amount of $3.4 million incurred to date, $0.4 million was unpaid and included in Other accrued liabilities in the Company’s Consolidated Balance Sheet as of August 31, 2005.  The Company believes it may incur up to an additional $1.2 million during the remainder of fiscal 2006 in professional fees and/or other costs related to this investigation.  As discussed more fully in Note 11 to the consolidated financial statements, no determination can yet be made as to whether the Company, in connection with the circumstances surrounding the Italian investigation, will become subject to any fines, penalties and/or other charges imposed by any governmental authority, or any other damages or costs that may arise in connection with these circumstances.  Accordingly, no provisions for any liabilities that may result upon closure of this matter have been made in the accompanying financial statements, other than the $0.4 million discussed above.

 

As discussed in moredetail in Note 11 to the consolidated financial statements and in Part II, Item1 below, we are aware of seven class-action lawsuits having been filed in theUnited States District Court for the Northern District of Georgia against theCompany and certain of our current and former directors and officers withrespect to alleged violations of the securities laws.  We believe each of the lawsuits is withoutmerit, and intend to defend each of these lawsuits vigorously.  While we do not currently expect thesematters to materially affect our financial condition or results of operations,there can be no assurance of any particular outcome.

 

Management expects thatcash and cash equivalents and cash flows from operations will be sufficient tosupport operations, scheduled debt repayments and planned capital expendituresfor the next 12 months, as well as fund future long-term debt payments.  There are no restrictions on the Company’sforeign subsidiaries in the matter of sending dividends, or making loans oradvances to the Parent Company.

 

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**Resultsof Operations**

 

Immucor generatedrevenues of $42.4 million for the three-month period ended August 31,2005, a $10.3 million increase over the same period in the prior fiscal year.  Net income totaled $8.0 million for thethree-month period ended August 31, 2005, a $3.1 million increase over netincome earned in the same period the prior fiscal year.  Diluted earnings per share totaled $0.17 on47.7 million weighted average shares outstanding for the quarter ended August 31,2005, as compared to diluted earnings per share of $0.10 on 47.6 million weightedaverage shares outstanding in the same period last fiscal year.  For the three-month period ended August 31,2005, the effect on net sales, gross margin and net income of the change in theEuro exchange rate was minimal.

 

Net Sales

 

Reagentrevenues grew to $39.2 million compared to $28.5 million in the prior yearquarter, a 37.6% increase.  The growth inreagent revenue occurred primarily as a result of traditional reagent priceincreases in North America, which contributed $9.0 million to the increase.  Capture product sales were $7.9 millionversus $6.4 million in the three-month period ended August 31, 2004,driven primarily by a changeover from selling the products in kits to sellingthe individual components – an operational change implemented in the thirdquarter of fiscal 2005 which resulted in increases in both volume and price. Humancollagen sales were $1.1 million versus $0.8 million in the previous periodended August 31, 2004.  Thisincrease was driven primarily due to the introduction of a new product(NouriCel). Sales of instruments were $2.1 million in the first quarter of 2006compared to $2.8 million in the first quarter of 2005.  Although the number of instruments installedincreased in the first quarter of fiscal 2006 from the number installed in thesame period in fiscal 2005, a greater portion of the revenue associated withthese instrument installations was subject to deferral under EITF Issue No. 00-21in the first quarter of fiscal 2006.

 

Gross Margin

 

The gross margin (grossprofit as a percentage of sales) on traditional reagents for the quarter ended August 31,2005 benefited from the price increases discussed above, increasing to 69.2%for the current quarter from 57.4% for the prior year quarter.  The gross margin on Capture products was 79.7%for the current quarter, compared with 77.8% in the prior year quarter.  Capture gross margin was favorably impactedby the third quarter of fiscal 2005 changeover discussed above. The grossmargin on human collagen sales was 28.3% during the current quarter, comparedwith 29.8% in the prior year quarter. Human collagen gross margin for the firstquarter of fiscal 2006 is lower than the gross margin for the first quarter offiscal 2005 due to a benefit associated with a standard cost revaluation in thefirst quarter of fiscal 2005. Instrument gross margin, including the impact ofthe cost of providing service was negative 74.9% for the current quarter,compared to positive 13.9% for the same quarter last year.  Instrument gross margin was adverselyaffected by the application of EITF Issue No. 00-21 as discussed above asthe cost is incurred upon transfer of title regardless of timing of revenuerecognition.

 

Operating Expenses

 

Research and development expenses were $1.3 million inthe first quarter of fiscal year 2006, $0.2 million more than those recorded inthe prior year quarter.  Spending on thedevelopment of the new third generation instrument targeted for the small- tomedium-sized hospital market (the “Galileo EchoTM”) was $0.3 million and $0.4million, respectively, for the three-month periods ended August 31, 2005and August 31, 2004.

 

Selling and marketingexpenses increased $1.1 million over the three-month period ended August 31,2004, but decreased as a percentage of sales. This decrease as a percentage of sales was due primarily to higherperiod-over-period sales as discussed more fully above.

 

Distribution expenses forthe three-month period ended August 31, 2005 decreased slightly from theprior year period and decreased also as a percentage of sales.  This decrease as a percentage of sales wasdue primarily to

 

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higher period-over-periodsales as discussed more fully above.

 

Generaland administrative expenses for the three-month period ended August 31,2005, rose approximately $2.8 million over the three-month period ended August 31,2004.  The increase was attributableprimarily to (1) higher audit and tax fees due mainly to theSarbanes-Oxley Section 404 internal control assessment, (2) higher legalfees due mainly to the Italian investigation, and (3) higher salariesresulting primarily from increased headcount.

 

Interest Expense

 

When compared to the correspondingprior year period, interest expense increased slightly for the three-monthperiod ended August 31, 2005, resulting primarily from accretion of theacquisition and guarantee liabilities. See Note 3 to the consolidated financial statements.

 

Other Income(Expense)

 

Otherincome, net, for the three-month period ended August 31, 2005, reflects primarilyforeign currency transaction gains that exceeded foreign currency transactionlosses.   Other income, net, for the three-month periodended August 31, 2004, reflectsa $0.3 million charge associated with the buyout of adistribution agreement in the first quarter of fiscal 2005 as well as the neteffect of foreign currency transaction gains and losses.

 

Income Taxes

 

The provision for incometaxes rose $1.7 million for the three-month period ended August 31, 2005, primarilydue to higher pre-tax income.

 

## **ITEM3.  Quantitative and QualitativeDisclosures on Market Risk.**

## ** **

Therehave been no material changes regarding the Company’s market risk position fromthe information provided in its Annual Report on Form 10-K for the fiscalyear ended May 31, 2005, except for additional foreign currency exchangerisk associated with the Company’s new majority owned subsidiary –Immucor-Kainos, Inc. This additional risk is in regards to the JapaneseYen, which is the local currency for this new subsidiary which has total assetsof approximately $13.6 million at August 31, 2005. Also, the acquisitionliability totaling $4.7 million included on the U.S. parent company’s balancesheet is denominated in Japanese Yen and is therefore subject to foreigncurrency exchange risk. For further details regarding the quantitative andqualitative disclosures about market risk, see Item 7A-Quantitative andQualitative Disclosures About Market Risk, contained in the Company’s AnnualReport on Form 10-K.

 

## **ITEM4.  Controls and Procedures.**

 

*(a) Evaluation of Disclosure Controls andprocedures*

 

The Company’s new majority owned subsidiary – Immucor-Kainos, Inc. –was excluded from management’s quarterly evaluation as of August 31, 2005 dueto the subsidiary being only recently acquired on July 5, 2005.  This subsidiary will be included in futureevaluations of the effectiveness of the Company’s disclosure controls andprocedures beginning no later than the quarter ending August 31, 2006.

 

As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2005, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) and 15d-15(b) under the Exchange Act as of the end of its most recent fiscal year – May 31, 2005. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are ineffective as of May 31, 2005, and identified the following control deficiencies in the Company’s internal control over financial reporting:

 

*RevenueRecognition and Billing Processes.*  Managementconcluded that as of May 31, 2005, material weaknesses existed related toineffective controls over the Company’s revenue recognition and billing

 

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processes resulting from:the lack of controls over the review of all arrangement documentation in orderto properly record revenue, the lack of controls over ensuring that allarrangement terms and conditions are known for proper revenue recognitionevaluation, and the lack of personnel with sufficient skills and experience toproperly record revenue from multi-element arrangements.

 

*FinancialStatement Close Process. *Management also concluded that as of May 31,2005, material weaknesses existed related to the Company’s financial statementclose process resulting from: the lack of adequate processes, controls, reviewand approval procedures to ensure that financial statements and disclosuresgenerated for external purposes are prepared in accordance with generallyaccepted accounting principles, the lack of personnel with sufficient skillsand experience to properly analyze certain technical accounting issues inaccordance with generally accepted accounting principles, and the lack ofadequate policies and procedures in certain international locations withrespect to preparing journal entries and reconciling certain significantaccounts.

 

TheCompany’s management concluded that the control deficiencies described aboveconstitute “material weaknesses” as defined by the Public Company AccountingOversight Board’s Accounting Standard No. 2.  As a result of these control deficiencies,management recorded material adjustments to the Company’s financial statementsduring the fiscal year ended May 31, 2005, and management concluded thatthe Company’s internal control over financial reporting was ineffective as of May 31,2005.  Therefore, Ernst & YoungLLP, the Company’s independent registered public accounting firm, issued anadverse opinion with respect to the Company’s internal control over financialreporting in the Company’s Form 10-K for the fiscal year ended May 31,2005.

 

Management did not record material adjustments tothe Company’s interim financial statements for the period ended August 31, 2005relating to these control deficiencies. However, these control deficiencies could result in amaterial misstatement to the Company’s annual or interim financial statementsthat would not be prevented or detected. Management, with the oversight of the Audit Committee of the Board ofDirectors, has begun the process of remediating these control deficiencies asexpeditiously as possible, but was unable to conclude that full remediation hasoccurred as of the date of this report – August 31, 2005.  Therefore, the Chief Executive Officer andChief Financial Officer have concluded that the Company’s disclosure controlsand procedures remain ineffective as of August 31, 2005.

 

*(b) Changes in Internal control over FinancialReporting*

 

As the Company’s fiscal 2005 internal control assessment was concludedonly recently, no significant remediation efforts regarding the controldeficiencies identified above were completed during the first quarter of fiscal2006. The Company has identified the following remediation areas which wereunderway subsequent to the first quarter of fiscal 2006:

 

•     Formalizing controls around periodicmonitoring of impairment indicators for inventory and fixed assets;

 

•     Strengthening the policiesand procedures surrounding fixed assets, including periodic physical counts andreconciliations of significant assets;

 

•     Strengthening the policiesand procedures surrounding the accounting for leases including centralizationof contracts for significant leases;

 

•     Strengthening the controlsrelated to stock option grant authorization, accounting and reporting;

 

•     Strengthening the review andapproval process around contract documentation, and seeking out additional expertisein revenue accounting policy matters;

 

•     Expanding review proceduresat each quarter end in support of footnote disclosures through a structureddisclosure committee that will be established;

 

•     Strengthening the controlsand review procedures relating to income taxes;

 

•     Further addition of internalaudit staff to increase the periodic review of compliance with management’sstated policies and procedures; and

 

•     Further addition ofaccounting staff and expertise to improve the control environment and tocompensate for the weaknesses identified.

 

Additionally, in August 2005, Steven C. Ramseyresigned as the Company’s Chief Financial Officer and was replaced on aninterim basis by Patrick D. Waddy.

 

Other than in connectionwith the foregoing, management’s quarterly evaluation as of August 31,2005 identified no changes in our internal control over financial reportingduring the first fiscal quarter that materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

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PART IIOTHER INFORMATION

 

## **ITEM 1.  Legal Proceedings.**

 

As previously reported,the Company’s Italian subsidiary and Dr. Gioacchino De Chirico, the formerPresident of the Italian subsidiary, became the subjects of a criminalinvestigation in Milan, Italy centered on payments by several companies to anItalian physician allegedly in exchange for favorable contract awards by hishospital. This development prompted the Company to initiate an internalinvestigation, which was conducted by the Audit Committee of the Board ofDirectors.  The internal investigationdetermined that the physician rendered services as the organizer and chairmanof a convention sponsored by the Italian subsidiary in October 2003; theCompany paid the physician 13,500 Euro in April 2004 for those services;and the payment was not improper. However, the invoice for those services did not properly identify thedoctor or the nature of his services, in violation of the books and recordsprovisions of the Foreign Corrupt Practices Act.  In November 2004 the Company voluntarilyreported this violation to the SEC.  Theinternal investigation also addressed six payments to another physician in1998, 1999 and 2000 totaling approximately $47,000.  Based on the investigation it appears thosepayments may have been related not only to the performance of certain servicesbut also to the introduction of an instrument system into that physician’shospital and perhaps other hospitals.

 

The Company has madethree voluntary submissions to the SEC, some of the Company’s officers and oneof the Company’s directors have voluntarily testified, and the Companycontinues to cooperate with the SEC.  TheSEC has issued a formal investigative order in the matter, but has yet to expressto the Company any conclusions about the ultimate outcome of itsinvestigation.  The Company has also haddiscussions with the Italian prosecutor concerning his investigation, but hehas not expressed to the Company any conclusions about the ultimate outcome ofthe investigation.  The Italianinvestigation is continuing and has been expanded to several other companiesnot related to Immucor, which may delay the closure of this matter in Italy.  No determination can yet be made as towhether, in connection with these circumstances, the Company will becomesubject to any fines, penalties and/or other charges imposed by anygovernmental authority, or any other damages or costs that may arise inconnection with these circumstances.

 

TheCompany is aware of seven class-action lawsuits having been filed in the UnitedStates District Court for the Northern District of Georgia against the Companyand certain of its current and former directors and officers with respect toalleged violations of the securities laws. All of the actions essentially duplicate one another, pleadingessentially the same allegations.  Thecomplaints filed in the lawsuits allege violations of Sections 10(b) and20(a) of the Securities Exchange Act of 1934 and Rule 10b-5promulgated thereunder, specifically alleging, among other things, that theCompany misrepresented that its financial statements and disclosures duringportions of the 2005 calendar year fairly and accurately reflected the Company’sresults of operations, which allegedly resulted in the purchase of the Company’scommon stock by at artificially inflated market prices.  The lawsuits seek compensatory and otherdamages, and costs and expenses associated with the litigation.  The Company believes that each of thelawsuits is without merit, and intends to defend each of these lawsuitsvigorously.  While the Company does notcurrently expect these matters to materially affect its financial condition orresults of operations, there can be no assurance of any particular outcome.

 

In September 2005, F.Baragano Pharmaceuticals filed suit against the Company in the U.S. DistrictCourt for the District of Puerto Rico, alleging that the Company cancelled adistribution contract without just cause, and is seeking $350,000 plusinterest, costs and attorney fees.  TheCompany is defending itself against this lawsuit, but at this time is not ableto determine the probability of a favorable or unfavorable outcome or anestimate of the amount or range of possible loss.

 

The Company's compliancewith its Affirmative Action Plan is being audited by the US Department ofLabor's Office of Federal Contract Compliance Programs (OFCCP) concerningpersonnel activity from July 1, 2003 through June 30, 2004 andJuly 1, 2004 through February 13, 2005.  If OFCCP determines that a violation ofFederal antidiscrimination statutes has occurred, it has the power to orderremedial action.  Due to the preliminarynature of this matter, we are not yet able to determine whether the Companywill become subject to any such remedial action.

 

Otherthan as set forth above, the Company is not currently subject to any materiallegal proceedings, nor, to the Company’s knowledge, is any material legalproceeding threatened against the Company. However, from time to time, theCompany may become a party to certain legal proceedings in the ordinary courseof business.

 

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## **ITEM2.  Unregistered Sales of EquitySecurities and Use of Proceeds.**

## ** **

The Company did notrepurchase any shares of its Common Stock during the quarter ended August 31,2005.  As of August 31, 2005, anaggregate of 1,002,750 shares of Common Stock remain authorized for repurchaseunder the Company’s stock repurchase programs.

 

## **ITEM6.  Exhibits and Reports on Form 8-K.**

## ** **

(a)          TheCompany has filed the following exhibits with this report.

 

31.1                           Certificationof Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

 

31.2                           Certificationof Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

 

32.1                           Certificationof Chief Executive Officer Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.*

 

32.2                           Certificationof Chief Financial Officer Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.*

 

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*Thecertifications contained in these exhibits are not “filed” for purposes of Section 18of the Exchange Act [15 U.S.C. 78r], or otherwise subject to the liability ofthat section.  Such certifications willnot be deemed to be incorporated by reference into any filing under theSecurities Act or the Exchange Act, except to the extent that the Companyspecifically incorporates them by reference.

 

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SIGNATURES

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   |               |      |                                                          | IMMUCOR, INC. |   |
|--------|--------------------|-----------|---------------------------------------------------------------|---------------|--------|
|   |               |      |                                                          | (Registrant)  |   |
|   |               |      |                                                          |
|   |               |      |                                                          |
| Date:  | November 10,  2005 |  By: | /s/ Edward L.  Gallup                                         |          |
|   |               |      | Edward L.  Gallup, Chief Executive Officer                    |
|   |               |      | (on behalf of  Registrant and as Principal Executive Officer) |
|   |               |      |                                                          |
|   |               |      |                                                          |
| Date:  | November 10,  2005 |  By: | /s/  Patrick D. Waddy                                         |          |
|   |               |      | Patrick  D. Waddy, Vice President –                      |
|   |               |      | Interim  Chief Financial Officer and Secretary                |
|   |               |      | (Principal  Financial and Accounting Officer)                 |
|        |                    |           |                                                               |               |        |  |  |

 

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**EXHIBIT INDEX**

 
| **Number** | ** ** | **Description**                                                                                               |
|------------|------------|---------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                          |
| 31.1       |       | Certification of  Principal Executive Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a).* |
|       |       |                                                                                                          |
| 31.2       |       | Certification of  Principal Financial Officer Pursuant to Rule 13a-14(a) and  Rule 15d-14(a).* |
|       |       |                                                                                                          |
| 32.1       |       | Certification of  Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.*   |
|       |       |                                                                                                          |
| 32.2       |       | Certification of  Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.*   |

 

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*                 Thecertifications contained in these exhibits are not “filed” for purposes of Section 18of the Exchange Act [15 U.S.C. 78r], or otherwise subject to the liability ofthat section.  Such certifications willnot be deemed to be incorporated by reference into any filing under theSecurities Act or the Exchange Act, except to the extent that the Companyspecifically incorporates them by reference.

 

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